US Economy Stalled
Real-time tax data indicates the U.S. economy stalled out last Autumn and has now gone negative. Income tax withholdings are down 0.2% year-over-year in real terms in the past four week. The trends indicate recession if they continue.
Via Email from TrimTabs …
“Real growth in income and employment taxes has been decelerating since last autumn, and it turned flat in recent weeks,” said David Santschi, CEO of TrimTabs. “If the trend persists, it would be consistent with a recession.”
While the latest Barron’s cover story assures us that the U.S. economy will avoid a recession and grow at a 3% pace this year (Gene Epstein, “This Storm Will Pass,” February 22, 2016), real-time tax data indicates the U.S. economy is already stalling out. Real growth in income tax withholdings decreased 0.2% year-over-year in the past four weeks, well below the real growth of 2.0% year-over-year in December and 3.0% year-over-year in January. We would not read too much into month-to-month variations at this time of year due to bonus-related factors, but growth this winter has been much lower than it was last autumn.
In addition, credit markets are flashing clear warning signs about future growth, growth in building permits and housing starts has pulled back, and manufacturing activity continues to contract.
Apparently seven years of virtually non-stop stimulus have been inadequate, which suggests the global financial system is more fragile than policymakers want to admit.
I spoke with TrimTabs CEO David Santschi on the phone and he added this pertinent comment:
“If the U.S. economy continues to weaken, we fully expect the Fed not only to start another round of quantitative easing but to adopt a negative interest rate policy that will likely be accompanied by restrictions on the use of physical currency.”
Barron’s Gene Epstein says What Recession? GDP Set to Grow 3%.
According to Epstein, “The gloomy stock market notwithstanding, economic growth in the U.S. could be the best in years.”
I am sticking with my call that a recession started in December.
Mike “Mish” Shedlock
“I am sticking with my call that a recession started in December.”
Concur. May well have started earlier. Will have to see how revisions play out.
Politically, a recession will be in Donald Trump’s wheelhouse. The longer The Establishment trots out “everything fine and getting better” (and vote for Rubio or HRC) while the guy in the street loses his job will only make Trump resonate more with voters.
Love him or hate him … wrap your mind around President Donald Trump (certainly not endorsing him … just how I see it).
“The gloomy stock market notwithstanding, economic growth in the U.S. could be the best in years.”
Yah. I guess, so. In other news, I might sprout wings from my butt & fly to the moon. It could happen.
Negative real rates require a move away from cash (physical notes & coin) as cash is an antithesis to a negative rate bank policy. In order for negative rates to react the way banks want them to, the use of cash must be stopped. Therefore effectively closing the financial exit door of the system to one and all. Forcing all to receive “the number of the beast”, or starve and be without shelter.
My back is strong enough to carry twenties home from the bank.
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The “we are already in a recession” column that Mish has been writing every week since 2011 and no recession has ever appeared. By the way, does any remember how on January 16 Mish ridiculed Jim Cramer for proclaiming the stock market downturn was over? Guess what…the Dow is higher now than it was on Jan 16.
At this point it’s like watching a slow motion train wreck.
Five years of a slow motion train wreck. Broken clocks are right more often.
I don’t believe this latest so-called DATA either. Where is the chart showing it’s not just seasonal, or a monthly fluctuation? The absence of this implies deception.
During the last recessions, freeway traffic (people going to JOBS) was noticeably off. Now the freeways are JAMMED with commuters.
Mish once posted year over year sales tax receipts and I emailed him that this was the only good data. He wrote back saying it was too hard to compile. So we get this nonsense, and monthly recession predictions for years.
This guy will never run my money.
Then apparently you must be highly pleased with our progress thus far. Many of we small business people have been languishing for the past six or seven years now…hanging on while we listen to “green shoots” and “recovery summer” and on and on. After struggling for years now, my gross sales are still only 75% of our 2008 highs, and are headed back down again with about a 10% decline in 15 and this year is starting out slower still. Admittedly I’m not in the financials or any other industry that is reliant on cheap and easy credit. When we see or world indebtedness has INCREASED by 60 or so trillion dollars and we are ever more dependent on the fiction of modern economics, just call me a doomer for thinking the worst, but at least I have lots of company. After being in business for thirty years, I may not be a PHD economist, but I have seen a few things,
I have not seen anything compared to the vitality of the economy during the bull market that lasted from 1982-2000. Very little improvement in living standards beyond more internet bandwidth. As far as I am concerned, we were better off in 1998.
The financial equivalent of a head-fake.
“we fully expect the Fed not only to start another round of quantitative easing but to adopt a negative interest rate policy that will likely be accompanied by restrictions on the use of physical currency”
Negative rates are most likely not going to happen in the US in any year, especially not in an election year. Imagine that becoming a political topic which it most definitely would, “Hey, they’re not only NOT paying you interest on your savings, they’re charging you to hold your money!” That would (should) kill the “We use your savings to loan to others and pay you part of the interest we charge them as part of the deal” mythology once and for all. Also, there are already all sorts of columns on the web by authors who are otherwise the foolish Keynesian faithful who reveal that negative rates are not working where it they have already been implemented. That’s a ready-made arsenal of political ammo against negative rates in the US.
No, I expect they’ll drop the rate to zero from the whopping rate they’ve recently raised it to, then QE, then helicopter drops, hopefully MUCH more than the $600 each dropped last time. Since nothing they do is going to work anyway because their economic theory and the models based upon it have proven to be absolute garbage time after time (simply compare Keynesian projections with reality), we might as well get a piece of the last gasps of the debt bubble action via helicopter money. That’s far better for the middle class than negative rates and far more politically palatable. If it helps bring this insanity to a more timely end via a deservedly huge crash, so much the better. First the crash, Darwinian bankruptcies flushing debt from the system (as should have been allowed in 2008 along with breaking up the TBTF banks), then a strong recovery with no one ever listening to clueless, ivory tower Keynesians ever again (that last part is my fervent wish).
Helicopter drops reek of desperation…something that our flimsy confidence model cannot withstand. Negative rates will be seen as punitive to wealth and a gift to the poor who have no savings to effectively tax. They will sell this like all other cons…as a gift, a simplification of our lives, to make things “easier”. The road to hell paved with conveniences. They will have no choice but to clamp down on cash transactions in order to keep cash on the balance sheets of the banks, but it will be sold to us as another convenience…but more importantly, justice. It will be sold as a means to eliminate crime and tax cheats. After all, all that government lacks in being all things to the people is MONEY and taxing these low-lifes will provide the pound of flesh desired. There are lots of ways to fix this, or at least reduce the severity of what we face, but there is no such solution that does not cost government power….specifically economic power, but also the immense power derived from our dependency.
We keep trying to quantify our circumstances with numerical metrics in order to give them meaning, but why? we know that much of what we are supplied is tainted data as the economy has been so distorted by government and banking intervention that it is hard to imagine how much accuracy any analysis can have. It is like we are feeling definitively ill but suffer a host of debilitating symptoms that can be attributed to a number of different diseases or illnesses. In our “system” so dependent upon the “perception” of stability, of confidence and trust, no real disease that would constitute a real threat would ever be allowed in public discussion. Our governments are dedicated to protecting us, even if it means lying to us….especially lying to us if our malady it directly attributable to their avarice and corruption.
I believe it is, and therefore we should NEVER expect the truth, much less real solutions. Name a “war” they have engaged in, in the last sixty years , that we have actually won….or even improved slightly our circumstances. War on drugs, poverty, illiteracy, crime, inequality,terror. How are we doing? Can it be that we just can’t win…or we just are not supposed to?
I live close to the ground and am part of the basic resource economy. It is not good times. Prices are low and demand is dropping. I definitely buy the recession projections.
Restrictions on the use of cash will further slow down the economy as people will no longer be able to spend the cash they have.
Oh, it will take some time to eliminate it completely. Just bet on some user tax associated with cash, similar to how many people who have for years charges a few percentage premium for credit card purchases. You will pay to hold and to spend it. Our government tries to stay subtle by not out right illegalizing things. They simply make it expensive to defy their wishes. The problem is they use taxation and penalties to coerce desired behaviors, yet also become dependent upon those same “sin” taxes, creating a conundrum for them. This is what Bernie faces with his agenda, planning on taxing wall street to fund his Utopian dreams meaning he either must embrace their criminality for sustained funding or kill the goose laying his golden eggs.
SURE LIKE YOUR NEW FORMAT—KISS….THANKS.
You say December, I say try October as the beginning of it.
It’s the little things that go away first before paying the bills (at least for those who try to be responsible). That said, Halloween came and I took my kids trick-or-treating. Half the houses that gave out a bit of candy last year weren’t home or home with the lights off, and a few posted no candy signs. Then in November, I watched as the crazy Black Friday sales came and no one cared to be there, with exceptions to the usual Wal-Mart and Target. As far as I could tell, much of their sale items were still available in December, some of it after the Christmas holiday. Our local mall never once had a full parking lot as it did in past years. Then December rolled in, and I saw nothing in the way of excitement for anyone, not even kids. It was like they were all burned out, and their parents exhausted.
As always, it’s the feet on the ground who see and feel it first. That told me more about the economy than many of the “analysts,” who watch numbers and religiously cling to their fiscal theories, ever will.
Thats your proof? Seriously? Participation in Halloween has been declining for decades, not just this year. Participation in black market sales has also been declining over the past few years… nothing to do with a “recession”. Welcome to the 21st century where you can find deals and reviews online within seconds and without leaving your house. People aren’t falling for the black friday “deals” anymore.
You miss my point. I see it everyday in the changes in schools, main street, and every day conversations. My examples are anecdotal, and would be different in different towns. But it all adds up the same.
Virtual reality isn’t real, Steven, no matter how much a person might adore it. Sure, internet is a game changer for much of retail. I never disputed that. But even shipping during this past holiday season wasn’t much to write about. But look around in places where wi-fi isn’t free or easy to access, and take a look around. You won’t seem an iLife.
I for one cancelled my family’s participation in holloween, when I started noticing the crimes and horrors of the day. I started wondering why they were happening, and then had this crazy thought: if the day celebrates horror, why should I be surprised when it moves to horror?
And thus, my trek with society stopped that day, on that subject. It has stopped on others, too.
A slowdown happen for sure but CFNAI-MA3 would indicate we are bouncing along. Still no drop below -0.70, which indicates recession started. Certainly this “recovery” hasnt’ been up to historical snuff either. In the era of advanced globalization, I would expect growth to be at par with inflation and both moving in lock step.
http://www.investing.com/analysis/chicago-fed:-economic-growth-picked-up-in-january-200119143